Shareholders Will Be Pleased With The Quality of Bright Horizons Family Solutions' (NYSE:BFAM) Earnings

Investors were underwhelmed by the solid earnings posted by Bright Horizons Family Solutions Inc. (NYSE:BFAM) recently. Our analysis says that investors should be optimistic, as the strong profit is built on solid foundations.

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The Impact Of Unusual Items On Profit

For anyone who wants to understand Bright Horizons Family Solutions' profit beyond the statutory numbers, it's important to note that during the last twelve months statutory profit was reduced by US$30m due to unusual items. While deductions due to unusual items are disappointing in the first instance, there is a silver lining. We looked at thousands of listed companies and found that unusual items are very often one-off in nature. And that's hardly a surprise given these line items are considered unusual. If Bright Horizons Family Solutions doesn't see those unusual expenses repeat, then all else being equal we'd expect its profit to increase over the coming year.

That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates.

Our Take On Bright Horizons Family Solutions' Profit Performance

Because unusual items detracted from Bright Horizons Family Solutions' earnings over the last year, you could argue that we can expect an improved result in the current quarter. Because of this, we think Bright Horizons Family Solutions' earnings potential is at least as good as it seems, and maybe even better! Better yet, its EPS are growing strongly, which is nice to see. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. While conducting our analysis, we found that Bright Horizons Family Solutions has 2 warning signs and it would be unwise to ignore them.

This note has only looked at a single factor that sheds light on the nature of Bright Horizons Family Solutions' profit. But there are plenty of other ways to inform your opinion of a company. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. So you may wish to see this free collection of companies boasting high return on equity, or this list of stocks with high insider ownership.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.